A blog about Northeast energy issues, and in support of nuclear power.

Thursday, February 14, 2013

Thoughts on Money: Revenue Sharing and Decommissioning Costs

My op-ed about Vermont Yankee economics appeared in the Valley News this Sunday. In that article, I discussed the state position in the appeals court hearing in New York last month. The state tried to make the case that Vermont Yankee had a negative economic effect on Vermont and its utilities. Nothing could be further from the truth. Vermont Yankee is an economic asset to the state. Also, if grid prices rise, the revenue-sharing part of the Memorandum of Understanding could send more than half a billion dollars from Vermont Yankee to state utilities. My "half a billion dollars" number comes from a quote from the attorney for the state, who apparently thinks that if Vermont Yankee shared money with Vermont utilities, that would be a Bad Thing.In the past few days, several local people told me that they had never heard of the revenue share arrangement before I wrote about it in the op-ed. They had no idea that Vermont Yankee might be paying a $500 million dollar bonus to local utilities. Yesterday, I received an email from a local man who is basically in favor of Vermont Yankee. He asked if perhaps the revenue share money could be added to the decommissioning fund? I wrote him a long response answering his question. I decided to share my email here, with a few changes.--------Hi and thanks for the email! Actually, revenue sharing is one issue, and decommissioning is a separate issue.

Revenue Share:

The purchase agreement for the plant (Memorandum of Understanding between Entergy, former owners, and the State Department of Public Service) requires ten years of revenue sharing. This contractual obligation kicks in after 2012 and when the grid price is above 6.1 cents. This revenue share money goes to the utilities.Vermont Yankee gives this money to the utilities, and the plant cannot use it for anything at the plant, including decommissioning.

Decommissioning:Decommissioning is a separate issue and a somewhat complicated one. Three interlocking points.1) The NRC supervises decommissioning funds and makes sure they are adequate.

When the stock market dropped around 2010, NRC required many plants (including VY) to add tens of millions of dollars to their decommissioning funds, because NRC judged that the funds had fallen below the required level. NRC does, indeed, watch these things.2) What is "adequate"? Greenfields?

NRC requires that the decommissioned site be radiologically safe and ready for another industrial facility. Many opponents want to raise the cost of decommissioning (Conservation Law Foundation has a branch, Conservation Law Foundation Ventures, that actually does decommissioning legal work, for money.) Opponents want to raise the costs, both for their own gain and to harass nuclear plants. For example, for Vermont Yankee, opponents are pressing the idea that the site should be "greenfield" with ALL underground concrete structures removed, switchyards removed...basically, a cow pasture. This would cost Yankee tons of money, estimated at more than $40 million dollars. "Greenfield" or "not-greenfield" is not something the NRC cares about, one way or the other. The NRC criteria require that a dismantled industrial site should be safe, and it should be ready for another industrial facility, not a cow pasture. If a state wants a cow pasture, that is between the state and the power plant. In the Vermont legislature, nuclear opponents are trying to pass a bill to require Vermont Yankee to instantly add "greenfield" money to a decommissioning fund. Conservation Law Foundation Ventures...gaining money from legal work about decommissioning for a nuclear plant and helping with site planning and popular acceptance for a gas-fired plant. They definitely stand to gain, monetarily, if Vermont Yankee is closed. My words in italics are not precisely their words. I suggest your read their boasts for yourself.http://www.clfventures.org/our-results/facility-owners/

Indian Point, from Wikipedia

3) What is "adequate"? SafStor?

Both the Vermont Yankee Memorandum of Understanding and the general NRC rules allow the plant to be mothballed (SafStor) for up to 60 years before full decommissioning is complete. This allows the plant to be less radiologically hot when decommissioned. It also allows the decommissioning fund to grow through accumulated interest while the costs of decommissioning (in constant dollars at least) actually sink, because the plant is less hot. The opponents constantly say they "won't allow SafStor" but actually, they can't stop it. If Vermont Yankee chooses to decommission using SafStor, they have both federal and state permission. At the federal level, SafStor is in their license and part of NRC policy. At the state level, it's in the Memorandum of Understanding.Many plants have used SafStor, but usually only for a few years. However, sometimes (for example Indian Point) a small plant was built, retired, and two bigger plants were built next to it. In that case, the small plant (Indian Point 1) may well be in SafeStor for more than 40 years, because decommissioning the small one might interfere with the other plants' operation.http://en.wikipedia.org/wiki/Indian_Point_Energy_Center------Ah, Valentines Day!My husband is off singing love songs to other women. Yes, it's the annual Barbershop Singing Valentines Fundraiser! So I am sitting around writing overly-long emails.

Here's an example...not his group.Have a lovely day my friend!Best,Meredith

Electricity prices in New England have been four to eight times higher than normal in the last few weeks, as the region’s extreme reliance on natural gas for power supplies has collided with a surge in demand for heating....

Thank you for sharing this. I have had email conversations with several people about this, but have not yet blogged about it.

In my opinion, this is one of the effects of handing our infrastructure (Green Mountain Power) to a gas company from Canada. They WANT us to be dependent on natural gas, and they are trying hard to achieve it. Also, you note that HQ cut electricity shipments to U S in half during the cold snap..needed the electricity at home. I blogged about this in the winners and losers post, last month. This cut in supply also increased prices.

New England is like the holder of a second mortgage while Quebec holds the first mortgage. When things get tight, the first mortgage gets paid first. When supplies get tight, Quebec companies report to their own regulators, and use the supplies in Canada. Legally and morally, when things get tight, they do what they can for their own people.

By doing SO much with Quebec companies, who are responsible first to their regulators, and second to ours, the Northeast has put ourselves in an unpleasant position.

In other words..what regulators do you think will help us? The ones in Canada control the situation. They aren't being bad people: they are just doing what they need to do for their own constituents. We are their market, not their constituents.